Being exempt from VAT as a commercial superyacht does not guarantee that you are exempt from all taxation in France. After the French fiscal authorities had laid out, finalised and confirmed the seven criteria needed to qualify for the French Commercial Exemption (FCE), French Customs, after endorsing the FCE criteria, added an unexpected twist with regards to excise duty of fuel (TIPCE).

The twist stems from the fact that current charter contracts are rental contracts and name the charterer as the final user. Since 95% of charters are for pleasure rather than commercial purposes, the charter operation cannot be exempt from excise duty. However, in order to allow the 2016 charter season to unfold without a glitch, Customs have granted a moratorium until the 1st October 2016 allowing yachts that comply with the first three provisions of the FCE to take on duty-free fuel this summer.

“It’s the thin end of the wedge this summer. Superyacht commercial operations have to comply with regulations set both by the fiscal authorities and by Customs. As soon as we have a service contract in place, we will be fully compliant and be able to operate legally with clear rules” explains Thibault Hermant of SOS Yachting France.

This stipulation is not the result of French government wishing to crack down on the superyacht industry, rather it is the result of top-down pressure from the European Union.

The contract issue can be overcome by putting either a service contract or a transport contract in place. MYBA is working on a draft of a service contract with the input of Customs. Similarly, the European Committee for Professional Yachting (ECPY) has already began drafting a new agreement.

The most likely option we will see in 2017 is a service contract. A transport contract would be a hard pill to swallow for the brokerage community due to the sudden liability responsibilities that would have been laid at their feet.

On the other hand, a service contract would allow the owning company to retain its purpose as well as avoid the pitfalls inherent in rentals and transport contracts.

“In France the bottom line is that they [the government] want the yachting industry to grow. They realise it produces revenue for the state coffers and for a huge number of small and medium business linked to the industry,” says Hermant. “They want it to flourish, but it’s the European Union that decides the format through which this can be achieved. But it actually seems that all the ducks are in a row at last.”

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